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The Market Will Have a Good Run Over the Next Two Months

August 22, 2010

Traditionally, September is the worst month of the year for the market. Now it seems that this year will be no exception. All data points to a very weak US economy: Unemployment, housing, you name it.

On the other hand, US corporations had very strong earnings. Right now, S&P 500 companies only trade at forward PE = 12. Intel's (INTC) forward PE is at 9, Apple (AAPL) and Google (GOOG) are both at 14 while all predict that they see no slow-down in their future growth.

I don't think that the market will crash in the next two months. If you look at the S&P 500 chart, it is at a critical point now: the SPX closed at 1,071.59 Friday. Its low, 1,063.91, was very close to 1,050 strong support. This is giving a possible very bullish reverse H&S pattern if the index can change its direction at 1,050. That may happen next week.




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